Antitrust Law Daily Wrap Up, RICO—N.D. Ill.: Health benefit fund’s RICO claims against Abbott and AbbVie over patient co-pay subsidy programs dismissed, (Sep 29, 2014)

By Linda O’Brien, J.D., LL.M.

The federal district court in Chicago has dismissed RICO claims by an employee health and welfare benefit fund against two pharmaceutical manufacturers for allegedly forming an enterprise to increase the sales of two brand name drugs through the administration of patient co-pay subsidy programs (New England Carpenters Health and Welfare Fund v. Abbot Laboratories, September 25, 2014, Dow, R.).

Abbott Laboratories and AbbVie, Inc. manufacture and market two brand name drugs, Humira and AndroGel. Humira is used to treat rheumatoid arthritis and plaque psoriasis and AndroGel is a replacement therapy for men with low testosterone levels. New England Carpenters Health and Welfare Fund (Fund) is an employee welfare benefit plan that provides health benefits to 22,000 participants throughout New England. In 2008, Abbott and Abbvie began to offer savings cards that discount patients’ co-pay obligations for the drugs to compete with less expensive generic drugs. Patients use the cards at pharmacies when they fill prescriptions for Humira and AndroGel which are processed as secondary insurance. The co-pay subsidy is deducted from the patient’s co-pay obligation and the pharmacy collects the balance from the patient. Abbott and Abbvie retained two companies to administer the savings cards programs.

The Fund filed suit against Abbott and Abbvie, alleging the co-pay subsidies interfere with pharmacies’ contractual obligations to collect co-pays directly for the Fund’s insured and that the defendants conceal the use of their co-pay subsidies by having them processed as a form of secondary insurance in violation of the Racketeer Influenced and Corrupt Organizations Act (RICO). Specifically, the plaintiff asserted that the co-pay subsidies are an incentive to its insureds to fill prescriptions with brand name drugs instead of less expensive generic alternatives. Additionally, the plaintiff has been overcharged for each drug purchased with a co-pay subsidy since the plaintiff must reimburse the pharmacy for the cost of the drug as if it were being sold at full price. The defendants moved for dismissal.

The court found that the plaintiff failed to sufficiently allege a viable RICO enterprise. To proceed with claims under RICO, a plaintiff must show that the defendant conducted the activities of an enterprise through a pattern of racketeering. The plaintiff contended that the defendants, their co-pay administrators, and network pharmacies formed two RICO enterprises to maximize the sales of Humira and AndroGel through the co-pay subsidy programs. The fraudulent processing of the savings cards as secondary insurance as opposed to discount coupons constituted a scheme to defraud that included predicate acts of mail and wire fraud.

According to the court, the plaintiff did not allege an enterprise that was separate and distinct from the defendants. There was no evidence of any association among the pharmacies beyond the fact that they processed the co-pay subsidies as secondary insurance or that the pharmacies shared a common goal of increasing sales of Humira and AndroGel by processing the co-pay subsidies as secondary insurance.

Moreover, the plaintiff did not allege facts showing that the pharmacies were part of a larger network along with the defendants and their program administrators. There were also no allegations that the pharmacies were involved in the defendants’ marketing strategy or business of administering the co-pay subsidies, or actually encouraged patients to purchase Humira or AndroGel. The members of the alleged enterprise appeared to engage in actions that were consistent with each group conducting their own business, the court concluded.

The case is No. 12 CV 1662.

Attorneys: Amy Elisabeth Keller (Wexler Wallace LLP), and Jennifer Fountain Connolly (Hagens Berman Sobol Shapiro LLP) for New England Carpenters Health and Welfare Fund. William F. Cavanaugh, Jr. (Patterson Belknap Webb & Tyler LLP) for Abbott Laboratories and AbbVie, Inc.

Companies: Abbott Laboratories; Abbvie, Inc.

Cases: RICO IllinoisNews